Where are the
jobs? Amidst the
many questions
about the domestic
and global economy,
the most worrying
is perhaps the most
basic. Historically,
job growth has resumed
quickly, even
after recessions. But
despite the technical
end of the Great
Recession, job
growth in the
US and other developed
economies has
remained extremely
weak. The last decade was the first since the
Great Depression in which the United States
recorded zero net job growth.

Left to consider this mystery, two economists,
predictably, arrive at opposite explanations.
Tyler Cowen’s The Great Stagnation
argues that we are living through the consequences
of a dramatic decrease in the rate of
innovation. To illustrate his point, Cowen
compares his life to that of his grandmother.
Between the 1910s and 1950s, she went from
not having indoor plumbing or electricity to
owning a stove, refrigerator, and other appliances,
whereas the only machine in Cowen’s
kitchen is a microwave. Nice innovation to
be sure, but hardly the radical change his
grandmother experienced. The consequence
of slowing innovation, argues Cowen, is fewer
new industries and less creative destruction.
Hence, no new jobs.

Erik Brynjolfsson and Andrew McAfee
analyze the same bleak jobs reports and
conclude that the root cause is not a decline
in innovation, but an acceleration of innovation.
Technological advancement has
moved so fast that many people are losing
the “race against the machine.” Computers
are rapidly performing tasks that used to require
humans, but workers are not adding
new skills fast enough to find new jobs. The
authors call the innovation that is occurring
“skill-biased technical change,” in that it
hurts workers with skills that can be automated
and dramatically increases the productivity
of the few high-skilled workers
who can access and manipulate more information
more quickly. Hence, no new jobs.

These opposite beliefs can be reconciled
more easily than is immediately apparent.
Brynjolfsson and McAfee focus on
the technology sector, where it appears
that innovation is happening more rapidly than ever. Cowen looks at the entire economy and
sees stagnation, or regression, in
large sectors, such as health care,
education, and government—indeed any sector that deals more
with managing people than with managing things, the former being more complex and less conducive
to innovation and job creation. As
general innovation opportunities
have slowed, businesses turn to
the next activity with the highest
return: cutting costs by using
technology advances to automate
processes and eliminating the
need to hire more workers to produce
more output.

Both arguments are compelling, yet the
frightening thing is that both books predict
the jobs crisis will not end soon. Cowen, in
keeping with his libertarian views, writes
that relatively little can be done until conditions
naturally evolve for another era of rapid
innovation. Brynjolfsson and McAfee,
buoyed by their technological view of the
world, are more activist. But their prescriptions
fail to induce much confidence. They
note, for instance, that current conditions
demand “hyperspecialization” from workers.
But our educational systems are built to
create large numbers of generalists, few specialists,
and very few hyperspecialists. Brynjolfsson
and McAfee also invoke entrepreneurship
and the greater ease today’s
entrepreneurs enjoy starting new businesses.
This enables “parallel experimentation
by millions of entrepreneurs,” which they
believe is where new jobs will come from.
But again, there are no successful formal
mechanisms in place to train entrepreneurs—and millions of those entrepreneurs
will fail and perhaps hyperspecialize
so far that they will have trouble
starting over. It would take a much longer
book to explore these prescriptions, but the
feeble ones presented here—to fix education,
make more entrepreneurs, and invest
in infrastructure—rehash ideas
that have been around for decades.
They are ideas whose execution,
to use Cowen’s phrase,
has stagnated.

Still, all the authors fervently
believe that things eventually
will get better. The open question
is how bad things will get
in the meantime. As President
Franklin D. Roosevelt noted,
and Brynjolfsson and McAfee
quote, “demoralization caused
by vast unemployment is … the
greatest menace to our society.”

The uninspiring nature of
Brynjolfsson and McAfee’s prescriptions
should serve as the
latest wake-up call to the social
sector. For years, we’ve been
talking about our inability to
provide an affordable, quality education to
a larger slice of the population. For years,
we’ve been talking about the glories of entrepreneurship,
social or otherwise, without
any measurable progress on improving the
success of—or providing the necessary skills
and capital for—aspiring entrepreneurs outside
of the elite. The cost of these failures is
no longer a future problem. It is a present
problem. If we are to escape the great stagnation
and win the race against the machine,
urgent action is needed. To fight the
greatest menace to society, we’ll need a lot
more experiments in education, regulation,
retraining, and social programs for those left
behind in the race against the machine and
job-shedding innovations.

Timothy Ogden is executive partner of Sona
Partners, editor-in-chief of Philanthropy Action, and a
regular blogger for SSIR.

We as an industry (IT) and as a society (American, Western, Human and Global) have not taken the time to address these issues. We’re not luddites here. We see a real problem that’s way too politicized in the current environment. The middle class is being gutted and a major contributor is high tech. The cycles are coming too fast for people to adapt to creative destruction.

We are headed towards crisis at breakneck speed but we trivialize it and ignore it (or treat it as political fodder).

Sigh…

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